Appropriation (2011/12 Estimates) Bill

Hon BILL ENGLISH (Minister of Finance) Link to this

I move—

Hon TREVOR MALLARD (Labour—Hutt South) Link to this

I will deal first of all with the Imprest Supply (Second for 2011/12) Bill, and I say that there appears to be nothing unusual about this bill. It is a pretty standard arrangement for the Government to incur both capital and operational expenditure in front of appropriation, basically just to have a backstop to make sure that the laws in relation to the Public Finance Act are not broken, and this bill appears to be unexceptional.

I will focus more, though, on the Appropriation (2011/12 Estimates) Bill and the comments that the Minister of Finance has made on that. I think that he just slipped in one of the things when he was commenting on the tax changes, or the “switch” he referred to from the previous year’s Budget. He said that the switch had no particular impact on the distribution of income. Well, nothing could be further from the truth. This was a tax switch that went from the poor to the rich. It increased GST and cut the top tax rate such that people like the Prime Minister had a tax cut of $1,000 a week. While my constituents, who are struggling with their kids, and struggling to pay the costs of power, transport, and rent, had a GST increase, a number of people, like the Prime Minister, had a tax cut of $1,000 a week.

There also seemed to be an element of surprise in the comments from the Minister of Finance on the deficit. It was almost as though he could not quite work out why we have a deficit. I think the Minister could do well to study such renowned economists as Ronald Reagan to see exactly how countries get the sort of deficit that this country now has. Clearly there are some external factors in the deficit, and Christchurch is one factor in it, but the way to compound a deficit is to give enormous tax cuts to people who do not consume, the rich people; to make cuts to the income and services that are available to poorer people, and thereby increase unemployment—which was increasing anyway—to reduce the tax take from middle-income people; and to require payments to go to a new, increasingly larger group of beneficiaries. And that is what the Government has done. So we have less tax coming in from middle-income people, less tax coming in from the rich because of the tax cuts, a requirement for increased services because of poverty, and increased payments in unemployment benefits.

As we have heard over the last 24 hours, because of its activities the Government has managed to make a massive shift of people from the unemployment benefit to the domestic purposes benefit, which it has trumpeted as being some sort of major success, but the increased numbers of the unemployed and other beneficiaries means there is a massive deficit. The Minister of Finance, who has been around this place for a while, should not be surprised that if we have less tax and more spending on benefits, we will end up with a bigger deficit. It is a pretty standard arrangement, and the Minister should not be surprised.

What has surprised me has been the lack of any suggestion of any plan, whatsoever, on the part of the National Government to get out of this problem. In fact, what the Government has done is to pretty actively work against the plan. It has made massive cuts to science and research as they pertain to agriculture. Funds that were attracting massive private sector matching have been eliminated, and, overall, business after business in my own electorate now needs funds. Probably because we are close to Industrial Research Ltd, the old Department of Industrial and Scientific Research, there are a lot of businesses that, although they would not be described as spin-offs, have a lot of the people who either previously worked in the Government science area or have worked closely with people who have. Within the Hutt Valley, within Wainuiōmata, there are quite a few pockets of good research, and in particular there is probably more development. Jobs are being created, sometimes in twos and threes, but sometimes in 50s, 60s, and 100s.

That job creation was given a boost by Labour’s tax credits for research and development, which have been so cruelly whipped away by this Government, because, as one of the managing directors of a local company has said, “There appears to be no wish on the part of the Government to have development occur in New Zealand.” That company is facing a couple of choices, and one of them is to go to Australia, where the culture is closer and the Government research arrangements are much better, and the other is to keep a very small intellectual property group here and to do a lot of the development and a lot of the other work in China. That is the story of far too many of our businesses at the moment.

We can contrast that with Labour’s policy and plan that is developing and becoming clear. I was at a meeting of Grey Power relatively recently, and its members are very, very keen on the $10 a week tax cut that each of them will get under Labour’s policy. Couples will get $20 a week. They think that is fair; they think that it somewhat balances the redistribution that occurred—from them, because they pay GST, to people on the $1,000 a week tax cut, like the Prime Minister and his friends.

Grey Power members also think that moving to a capital gains tax is a fair approach too, because clearly once we get to the point where we know that it will not be retrospective, and where we know that it will not apply to the family home, people will say that essentially a buck is a buck. It does not matter how it is earned. It does not matter whether it is earned through capital gain or through income; it should be taxable. It is unfair for people like Sam Morgan—and in fact he says himself that it is unfair for his company—to sell for $700 million and not to have any taxation put on that. Of course, if he stayed in the company and drew the money out as salary or dividends, then he would have to pay the tax. But in this particular case, and in the many, many more like it, that tax is not paid.

I will now turn to reaction to the Budget, and say that Standard and Poor’s, I think, got it about right. They have put New Zealand on negative credit watch. I have to say we were not in such a flash position to start with. I think it is fair to say that some of the expected upgrades that should have occurred have not occurred, and I think we are now just about past the point of believability as far as the Minister of Finance is concerned. That massive decrease in unemployment, that increase in productivity, and that increase in wages, which for each of the last 3 years he has promoted as being just around the corner, I think most of us understand are not coming at all.

I will finish on what I think is the most dishonest part of this Budget. It is the suggestion that we can sell assets and be better off, in the way that John Key has promoted. We all know, as 90 percent of New Zealanders know, that we do not sell our house to then rent it back. That is a sign of desperation. That is a sign of people who are distressed.

AMY ADAMS (National—Selwyn) Link to this

I am very happy to rise this afternoon to take a call in this debate on what is technically the third reading of the Appropriation (2011/12 Estimates) Bill and the second reading of the Imprest Supply Bill, but really, more broadly than that, I think this debate is a good chance to have a bit of health check on the company’s economic performance and the economic position we find ourselves in. I think there is no more important time to do that, given the situation that the world finds itself in. We have followed with horrified attention the growing concerns in the European Union for some months now. We have watched it spread from the disasters in Greece and Portugal into very mainstream economies like Spain and Italy now. I certainly do not claim by any stretch to be any sort of expert, but I know enough to be very concerned, as I know most thinking New Zealanders are, about the economic situation in the European Union.

Of course, more recently we have watched the old superpower America teeter on the brink of complete collapse, and we have seen its economy not only downgraded recently, but also put on further negative watch. That tells us how important it is that we can present to the world the face of a strong economy that has its books in order, its debts under control, and, most important, is being led by a Government that knows how to run a strong economy and knows how important it is to keep the accounts in good order and keep us in good shape. We have seen over the three Budgets delivered by the John Key - led Government a story of returning this country to the strong position it deserves to be in, putting us on the front foot and putting us in a position where we are economically competitive internationally and where the world and the lending markets know we are a good bet.

All of New Zealand can reflect back with some pride on the fact that although we are by no means out of the woods and we still have a difficult period ahead of us—and I certainly do not want to diminish the reality of that—New Zealand is in a very strong position right now. Compared with so much of the rest of the world, we are in a good position. We have a strong Government, we have a Government that knows how to manage the economy, and we have a Government that has acted early, from as soon as it was elected in 2008, to turn round the never-ending deficits bequeathed to us by the last Government. It wants to turn round the explosion of the bloated bureaucracy and to instead turn our focus back to the productive sector of this economy and say that our job as the Government, first and foremost, is to make sure that we keep our house in order. If we cannot control the 25 percent of the economy that is central government, then there is little hope that the rest of the country will follow suit. I think we have done that.

We have sent a very clear message that we will get Government expenditure under control. We will not sit and preside over ever-growing Government expenditure, and what is worse is that the growing expenditure under the Labour Government did not deliver any better outcomes. Time and time again, we saw more and more money being thrown into the bottomless pit of bureaucracy, with no improvement in the outcomes. What have we had under this National Government? We have had tight fiscal management. We have put pressure on the chief executives of Government departments, yet we have seen better outcomes.

Tony Ryall stands up in this House, day after day, and reports on the fact that more New Zealanders are getting elective surgery now than ever before. More New Zealanders are getting access to more medicines than ever before, and we have not done that by simply throwing more money at the problem and hoping it will go away. We have done that by imposing some pretty tough requirements and making it very clear that our expectation is that the Public Service will do more with taxpayers’ money. It will do more with the money we take from hard-working New Zealanders, and it will recognise, acknowledge, and thank, frankly, the New Zealanders who go out to work every day and pay their taxes to enable that to happen. Controlling Government expenditure has been a core part of what we are about.

The other very important part—and if anyone doubts the importance of it, recent events should certainly put them right—is presenting a credible picture of the control of national debt to the world. I acknowledge that a large part of our net investment position is made up of private debt, but the track we have now set New Zealand on with regard to Government debt is something to be proud of. The fact that we will now see core Crown debt peak at no more than 30 percent and that we are seeing a return to surplus in a little more than 3 years is an absolute endorsement of the John Key - led Government and the work it has done to put our economic house in order. We have controlled Government expenditure, we have our debt position under control, and we have put ourselves in the position where the rest of the world can look at us and know that we are still a good bet—and if we need to borrow, it is certainly ready to lend to us.

We are supporting the productive economy, because National Governments get it. We get that Governments have money only if the productive sector is working, growing, and paying its taxes, and our job is to support it in that. It is not to get in its way, it is not to put up barriers, and it is not to smack down anyone who dares to be successful in this country. It is to say “Good on you. Thank you for being here. Thank you for working hard.” That is part of the reform of our tax system. The Minister of Finance talked in his contribution about the biggest reform of the tax system in 25 years, which this Government is overseeing. That tax switch, despite what the previous speaker, Trevor Mallard, said, was tax-neutral. It was broadly tax-neutral. The tax cuts across the board that now see over two-thirds of taxpayers—two-thirds of taxpayers—paying no more than 17.5 percent in income tax funded the increase in GST.

Labour wants to talk time and time again about the $1,000 tax cuts. Those members talk about $1,000 tax cuts. For the few people who get those cuts, let us just reflect upon the fact that to have had a $1,000-a-week tax cut, as Trevor Mallard goes on about ad nauseam, one must be paying more than a quarter of a million dollars in tax every year after the tax cuts—after them. Those people whom Trevor Mallard wants to harangue, bully, and vilify are paying, every single year, a quarter of a million dollars in income tax alone to support the families in New Zealand who need it. If we are to vilify those people and beat them up, as Trevor Mallard would have us do, I would not blame them for asking themselves why they would stay. If Mr Mallard wants to scare away and beat the golden goose, then I say good luck to him, but I ask him who will pay for his welfare and his handouts. Who will pay for his excessive government spending and lolly scrambles? I say to Mr Mallard that every time he wants to talk about $1,000-a-week tax cuts, he should just bear in mind that the people whom that member refers to are paying now—after the tax changes—more than a quarter of a million dollars in income tax every year to support this country. Frankly, I would rather that they were doing that in our economy than anywhere else around the world.

When we talk about the tax system, I think it is also worth reflecting on the fact that the lowest 43 percent of income earners in this country receive more in Government transfers than they pay in income tax. How do we give income tax cuts to people who do not pay any net income tax? Households have to earn on average more than $110,000 a year before the Government starts to make a net buck off them. That is fine, but I will not accept the suggestion that we are not being fair when people have to earn more than $110,000 before they actually start to contribute to the net performance of New Zealand.

This Government is controlling Government expenditure. It has turned round our debt position. It is supporting the productive economy. It has reformed the tax system to be fair and to be aspirational. It is building world-leading infrastructure to support our economy. It is raising skill levels across the board. It is investing in science and innovation. It is doing all of this so that we can move New Zealand forward. We will not follow the Labour plan of taking New Zealand backwards into the dark ages of more tax, more debt, and more spending. We are interested in moving this country forward and raising the outcomes for all New Zealanders, and that can happen only by fixing the economic mess that Labour left us. The three Budgets we have seen from Bill English and John Key are a step in that direction. The fact that we are in such a strong position while the rest of the world struggles under this period of global turmoil is a credit to the National-led Government. It is a credit to our economic management. It is why New Zealanders will continue to support us. They want to see us take this country forward, and that is what we are planning to deliver.

GRANT ROBERTSON (Labour—Wellington Central) Link to this

The Appropriation (2011/12 Estimates) Bill could be read as an innocuous set of figures. That is essentially what we see here. It is the estimates. There are some big numbers sitting beside things and there are some smaller numbers sitting beside others. For instance, we could look at the Department of Corrections budget. We would see that something over $800 million is being spent on prison custodial services and that a somewhat smaller amount of money—about $140 million—is being spent on reintegration and rehabilitation services, and we could say that that might indicate some of the priorities of this Government.

But this document is much more than just a set of figures. This document should represent the plan that the Government has for the country, for the future of New Zealand. It is not just numbers, but it should be the vision, the bold outline, of where a Government wants to take a country. When we look at this document, we see that it is sadly lacking in any kind of vision or any kind of plan. It does not deliver hope to New Zealanders. Where is the sunny optimism of the Prime Minister from before the last election and in the first year of his term? He is the man who said that there would be this great wealth of opportunity for New Zealanders.

METIRIA TUREI (Co-Leader—Green) Link to this

I am pleased to stand on behalf of the Green Party and address the Government’s economic strategy through the Appropriation (2011/12 Estimates) Bill and the Imprest Supply (Second for 2011/12) Bill. In any economic debate, the values of political parties are laid bare. Politics and economics are about the allocation of resources. The decisions that politicians make, and the values that are triggered by those decisions, determine who will benefit from the country’s economy and who will not. This National Government has made decisions that shift resources from those who need the most and has given them to those who have the most. As a result, our economy has become increasingly unfair and unequal. The Government’s tax cuts, which went primarily to the top income earners, are just one example of this. They were unfair and they were poorly timed. These tax cuts have not been revenue-neutral, as Bill English likes to say—at least not in the short term.

Borrowing to grant tax relief to the wealthy is not a smart way to manage the economy. Equally, borrowing to pay for the rebuilding of Christchurch when a majority of New Zealanders are willing to pay a small levy on their income to foot this bill is similarly not a smart way to finance the rebuilding of Christchurch. The Government is also preparing to borrow to help fund its $19 billion expansion of our State highway system over the next 10 years. This is not a good time to be borrowing to build infrastructure that is vulnerable to high oil and carbon prices. The community knows this; the Government does not. Faced with a Budget deficit, in part of its own making, this Government has chosen to cut services to families and to increase debt. Despite being told that we cannot afford to have services to families, we are unnecessarily borrowing to fund tax cuts, motorways, and the Christchurch rebuild, which Kiwis have all said we should share the cost of.

This is a Government that is not afraid to borrow when it suits it. Treasury are forecasting net core Crown debt to go from $10.5 billion in 2008 to $41.5 billion this year, then to $72.9 billion in 2015. These decisions mean that as a country we will run the largest fiscal deficit in our nation’s history. The Green Party has exposed this Government’s economic decision-making as destructive to both our people and our environment, and, as a result, destructive to our economic security as a nation. This Government chooses policies that will impoverish our children, degrade our environment, and prioritise short-term wealth acquisition over long-term stability. The Green Party makes constructive, hopeful, and practical choices that will protect our environment, protect our economy, and protect our kids.

Let us consider our kids first, as 270,000 children live in poverty in New Zealand right now. That is one in four. One-quarter of all New Zealand children are growing up in poverty. International research puts the cost of not acting to address child poverty at around 3 percent of GDP per year. In this country, that means that about $6 billion every year is lost in health, justice, education, and welfare spending that could be saved if we chose to act early to prevent child poverty. Bringing kids out of poverty does not just make humanitarian sense; it makes economic sense, as well. A Unicef report, Child Poverty in Rich Countries—that includes New Zealand—states: “Variation in government policy appears to account for most of the variation in child poverty levels between OECD countries.” More important, the report also states that many OECD countries appear to have the potential to reduce child poverty to below 10 percent without—without—a significant increase in Government spending. The economic argument for investing in our kids does not require a huge amount of Government expenditure. It requires better prioritisation of existing Government spending and more compassionate decision-making—economic decisions—that looks beyond the short term and the next election.

The Green Party’s solutions for bringing 100,000 children out of poverty are affordable and practical. One of our solutions is to make Working for Families fairer. Working for Families helps low-income families make ends meet, but it does not provide the same help to kids whose parents receive a benefit. We would incorporate the in-work tax credit into the family tax credit and extend it to 140,000 of the poorest households in this country. That would give an extra $60 a week to those 140,000 families. It would be enough on its own to bring 100,000 children out of poverty. This policy would cost around $300 million a year. That is less than 0.3 of GDP. While child poverty is costing us $6 billion a year, this solution is just a fraction of that. It costs us more to do nothing than to do something. It is fiscally irresponsible to allow children in this country to continue to grow up in poverty.

But this Government has priorities other than children. Instead of addressing child poverty, National is allocating $1.4 billion in this year’s Budget to subsidise pollution under its emissions trading scheme. Instead of helping our must vulnerable children, National is spending money on an unnecessary “Holiday Highway”. For just a fraction of the cost, thousands of children could be brought out of poverty. Thousands of children could be provided with the opportunities that National members say those children are entitled to, but refuse to support.

This Government has made life tougher for those on low incomes. High rates of inflation and the increase in GST mean that the lowest incomes have less for the basics. A total of 275,000 New Zealanders work for the minimum wage. Many of them take care of dependent children. For every five children living in poverty, two are in households that work—for every five, two are living in households that work. Finding a job is not a panacea to ending child poverty, at least while wages remain so low. It is impossible to make ends meet on the minimum wage, so the Green Party would immediately raise the minimum wage to $15 an hour to help working parents provide the basics for their kids. Again, that is worth about $60 extra a week for someone working full-time on the minimum wage. Not only will raising the minimum wage help those families who are in work, but it will generate up to around $173 million a year for the Government at a time when the fiscal deficit is ballooning. That is smart economics in action: supporting families and children, raising children out of poverty, and raising money for the Government. What can anyone possibly suggest would be a more important priority than those families and those kids?

The recent NBR Rich List shows that there has been a 20 percent increase in the combined wealth of the 150 richest New Zealanders. A 20 percent increase in the minimum wage would have seen the minimum wage jump to $15.60. We know that most of those who are employed on the minimum wage work for very large corporate entities that can well afford to pay that little bit extra to enable those families to take better care of their families and their kids. When the National Government chooses to keep the minimum wage low, it chooses to keep families in poverty. When the National Government chooses to keep the minimum wage low, it chooses to keep children in poverty. The Greens have the courage to look at revenue-raising options, which this National Government has failed to consider out of weakness, to ensure that we can continue to live within our means in this country.

Economic and fiscal sustainability is an integral part of the Green vision for a sustainable economy that is fair. We would reprioritise Government spending towards those who need it the most, while reducing debt. We would raise a comprehensive tax on capital gains—excluding the family home—that in time would raise some $4.5 billion a year and close the single-biggest remaining tax loophole in our tax system. We would put a fair price on carbon and water, dismantling some of the last Government subsidies paid out to polluters and industrial farmers. A clean, green economy that works for everyone, including our most vulnerable, is a better and fairer alternative than this Government’s irresponsible fiscal approach. Thank you.

CHRIS TREMAIN (National—Napier) Link to this

I rise to speak on the Appropriations (2011/12 Estimates) Bill, as we move this bill and the Budget through the House today. I will commence my speech by replying to, or rebutting, Mr Robertson, who used a number of quotes by Mr John Armstrong about the Budget and projections for its future. At the same time, Mr Robertson forgot to mention that a number of economists throughout New Zealand—more than a number—believe that the Budget was relatively conservative, and that it was infinitely achievable.

What brings a lot of impetus and merit to these other projections and other comments is the growth rates for the January through March period, the first quarter of this year. The forecasts were for about 0.4 percent growth for the economy, but what did we achieve? We achieved 0.8 percent growth for that 3-month period. It was double the forecast. What is more, officials went back and had a look at the growth figures for the period of October through to December, and they bumped those up as well. On any measure, that would indicate that the projections we had for this Budget were pretty conservative and on the mark. In fact, those projections are being supported now by data—actual data—in our economy. Actual people and businesses are getting out there, starting and growing new businesses, employing more people, and paying more tax in this economy. That is a fantastic way to continue with this Budget debate.

Those projections and data deliver upon some of the key focuses of this Budget, one of which was to get New Zealand back into surplus by 2014-15. What happens when we get back into surplus? We will not have to draw down the debt that we need when we are operating in deficit. It is a key function of the Government to operate in surplus as we get back into better times. I think that that, underpinned by the data that has been shown in the economy, means we are definitely moving in the right direction.

The second thing about the Budget was that we based it on some pretty sound principles of home economics. The first principle is to spend less than we earn, over the long term.

RAHUI KATENE (Māori Party—Te Tai Tonga) Link to this

I found it very interesting listening to the previous speaker talking about the household economy. He said that the first rule is that one does not spend more than one earns, and the second rule is that one does not borrow more than one can pay back. Does that member not realise that those are mutually exclusive? If someone is living within their means, then they should not need to borrow.

In May of this year, in the first flush of post-Budget analysis Kerry McDonald, chair of the Savings Working Group, bemoaned the continued lack of robust strategic economic thinking in New Zealand. In his view the real extent of the problems facing the New Zealand economy are fundamental structural issues that have to be dealt with. There is no clear statement of where the Government wants to take the country, and there is little attention to the structure of our economic system. Instead, we seem to always be responding to symptoms, and there is little appetite for long-term thinking in the national interest. Add to these the persistent concerns around our high debt level, a comprehensive lack of savings, and the fact that the household income for most households has not been growing, and I think we start to get some sense of the dimensions of the problem.

It is a no-brainer that we are operating within fiscal constraints, so there is even more incentive for bringing a heightened level of transparency and accountability to Government expenditure. Within the Māori Party our demand for excellence pushes us even further to demand whole-of-Government effectiveness for Māori. The rights and responsibilities of tangata whenua embodied in the concept of tūrangawaewae bring with it the highest standards of citizenship, yet in the current economy citizenship is consistently exchanged for economic access. In effect, this reduces the mana of citizenship and increases the mana of economic roles. The idea that each person is equal in value is being increasingly replaced by the idea that each dollar is equal and people with more dollars are therefore deemed more important and meaningful.

The Māori Party has great concerns about the nature of such thinking. We seek to lead the conversation for all New Zealanders that economic policies must be built upon social and cultural structures. Economic success involves more than monetary profit and consumption as solely economic factors. We believe firmly in the proposition that what is good for Māori is good for New Zealand, so our interest therefore is in establishing initiatives that replace the current policy emphasis on matching external economic indices with a policy of matching or exceeding external quality-of-life indices. Such bold thinking by the Māori Party is in line with the United Nations General Assembly, which just 3 weeks ago called on member States to undertake steps that give more importance to happiness and well-being and determining how to achieve and measure social and economic development. The assembly invited countries “to pursue the elaboration of additional measures that better capture the importance of the pursuit of happiness and well-being in development with a view to guiding their public policies.” It noted that “the pursuit of happiness is a fundamental human goal,”. The General Assembly resolution says that happiness is critical in advancing economic growth and social progress. The resolution called on a balanced approach to economic growth that can lead to sustainable development, poverty eradication, happiness, and the well-being of the planet.

The Māori Party is really pleased with the progress being promoted internationally. We see that as being very much of the same line of thinking that we have been progressing through the genuine progress indicator. Our interest in the genuine progress indicator came about in recognising that the GDP indicator was never designed to and cannot adequately reflect the happiness and well-being of people in a country. In short, it brings about an approach in which unsustainable patterns of production and consumption work against sustainable development.

I will demonstrate how we have tried to promote new ways of thinking in some of the portfolios in which Māori Party Ministers have provided leadership. In the focus on Māori economic development, we expressed our support for economic systems to be aligned with, or driven by, social and cultural systems. The Minister of Māori Affairs has pioneered key initiatives in Māori tourism, Māori productivity and export growth, Māori innovation, and Māori skills acquisition, including cadetships and the relationship with InfraTrain. His strategy has promoted the use of whanaungatanga as a Māori-led approach to international trade, commercial relationships with Māori living overseas, and Māori enterprise initiatives in the domestic economy. We have seen evidence of this strategy in both the Māori Economic Taskforce, from the Māori economic summit, and the delegation to China. What we are doing is building on both the cultural strength and entrepreneurial acumen of Māori to also lead to social and economic outcomes.

Another aspect of a kaupapa-driven approach to economic development comes through the development of a language strategy. In the Māori Affairs Committee report there was coverage of the revitalisation of te reo Māori. I noted with disappointment the comments around the inability of institutions to deliver the desired increase in the number of speakers and the depth of te reo comprehension. When we look at balancing the accounts, we see that although we know that te reo rangatira can contribute to wealth generation both nationally and internationally, the value of the language asset is not being realised if we have poor institutional commitment.

This is a complex and fascinating process, which will bring New Zealanders into close relationship with our very foundations as a nation. As a proud uri of Ngāi Tahu, I have to say how delighted I am that we have a distinguished statesman in Tā Tīpene O’Regan leading the way, along with the very impressive membership, including Emeritus Professor Ranginui Walker, Professor Linda Smith, Dr Leonie Pīhama, and Hinurewa Poutu.

The second major platform of our policy transformation is Whānau Ora. The 2011-12 Budget invested another $30 million in Whānau Ora, which was a key source of interest at the select committee—and rightly so. Whānau Ora is an incredible initiative, which I think has received universal support around the House, and indeed around the country. It absolutely reflects the efforts we have made to model a new approach for a kaupapa-driven economy. Whānau Ora seeks to reflect the aspirations of whānau and support them in self-managing and taking responsibility for their own social, cultural, and economic development.

I have been meeting with whānau around the country who have been involved in Whānau Ora already, and even though they have not yet managed to access any of the funding from Whānau Ora those who are readying themselves for that transformation have made a transformation in themselves. They have realised that Whānau Ora means that they can make a difference in their own lives.

I have to say that as the Māori Party moves on and starts to make sure that our policy is included within that of the bigger parties, we are making a difference. We are making a difference and we are proud of making that difference. The Māori Party is pleased to support this Budget. We will be even more pleased when this Budget reflects the economic reality of what we need to be doing in New Zealand: a kaupapa-driven economy. Kia ora.

DAVID BENNETT (National—Hamilton East) Link to this

It gives me great pleasure to follow on from the last two speakers, Chris Tremain and Rahui Katene. I thought both of them indicated two fundamental points of view that I think the New Zealand public and the world are waking up to at the moment. This imprest supply debate is crucial for that, because it reflects the vision of this Government and how we deal with our economy and build a stronger future for New Zealand.

The two things I thought were important were, first, a thing that Chris Tremain talked about, which was the need to get our economic fundamentals right. The days of living—

Hon LIANNE DALZIEL (Labour—Christchurch East) Link to this

I have listened to members opposite talk about the household and I consider that some of their comments have been somewhat patronising: “Don’t live beyond your means.”, and: “You’ve got to make sure that you don’t borrow more than you can afford to service in terms of your mortgage.” But they do not take their analogy that one step further. And what is that analogy that they have not managed to bring into the debate thus far? The advice they would give the ordinary householder in New Zealand is to sell their house and rent it back from whomever they sold it to. That is exactly the advice they would give: sell the house and rent it back. Does that leave the ordinary householder with an asset? No, that actually divests them of the one asset they will have in their lifetime that they can guarantee they are able to pass on to their children. They cannot pass on their rent situation to their children; they can pass on their asset. That is what National Government members never say when they are talking about this.

Let us have a little unpacking of the asset-sale argument. National members are not telling the public that the asset-sale argument is fundamentally flawed in terms of the essential asset or dividend-stripping that it bequeaths to generation after generation after generation. This is not something that happens just overnight. The return is something that happens just overnight, but the long-term effects are paid for not by us but by our children and our grandchildren and their children beyond. It is economically illogical to sell our country’s energy State-owned enterprises in order to pay down debt. The dividend yield of the four companies was 7.6 percent last year, which exceeds the 10-year bond rate of 6 percent, so the Government will be a net loser by selling half of each energy company to avoid raising new debt.

John Key says he wants to give Kiwi mums and dads the opportunity to own a stake of the State-owned enterprises. But they already own State-owned enterprises; that is what public ownership means. I have a very old poster on my wall from the 1980s, and it has a wonderful picture of these private sector vultures sitting on the sideline, eyeing up the hospitals and the various other State assets. The subtext is public they’re ours; private they’re theirs, and that is exactly what is going on here. The Government is willing to sell off this country’s future for the short-term gain it would provide to our balance sheet.

Foreign investors—not mum and dad investors—are the true winners from privatisation. Since Contact Energy was sold offshore by National in 1999, it has paid $1.5 billion in dividends to its private, mainly Australian, shareholders. I do not think the people of New Zealand will fall for it. They know this election is a referendum on asset sales, and I know on which side of that argument they want to fall.

This bill represents a Budget that does not treat New Zealanders in an even-handed fashion. I think New Zealanders have that kind of fairness in the way they think about things, the way we think about things. The fair suck of the sav, I think is a Kiwiism if there ever was one. When everyone pays their fair share, that is what it is about—people paying their fair share. What this Budget does, however, is reinforce the advantage this Government gave to the highest-income earners, with massive, unaffordable tax cuts. They were massive and they were unaffordable. They certainly advantaged those at the very highest rung of income earners in this country. The Budget has also exposed the impact that the GST increase has had on the economy as a whole, but particularly on lower-wage earners, and those on fixed incomes like superannuation.

This Budget also reinforces the stark reality of a Government that simply does not have a plan. I cannot believe it. After 2½ years in Government—and National had 9 years in Opposition—those members still do not have a plan. They do not have a plan. I have developed a particular interest this year in something called disaster recovery, because, for obvious reasons, in representing the eastern suburbs of Christchurch it is quite plain that disaster recovery is an important feature of our lives going forward. Everything I have read about disaster recovery starts with the planning process. It is so fundamental that it is an engaged process, and one that really identifies any pre-existing vulnerabilities, in order to ensure that when we build back, we build back better and stronger, and in order to ensure that we are better prepared to withstand future disasters.

It seems to me that the situation we face in New Zealand, in light of the impact of the global financial crisis, is exactly the same as the one we face in Christchurch. I think we should take some of the lessons from the disaster-planning model and apply it to our own economy. I have to say, though, that international best practice on disaster-recovery planning is not happening in Christchurch at the moment, but it should be. The principles that underpin it are what should guide our response to the recession. As in Christchurch, there is no plan, and despite all of the smiling and waving, there is no one in charge. The Prime Minister said he would turbocharge the economy, but he has not managed to get beyond kicking the tyres, as we all know.

If we look at our pre-existing vulnerabilities—and I think this is the most serious point—we see New Zealand’s love affair with property speculation, gaming the absence of a capital gains tax to ensure that the income a sale generates is not taxed at all. That has been part of our problem. That is a pre-existing vulnerability, and if we are going to withstand future crises—because they will come, as sure as eggs are eggs; we are in a cyclical environment—we have to be better prepared, and we have to deal with that anomaly. The reality is that not all income earned in this country is taxed, and somebody has to have the courage to face up to that and to address it. Not only does that mean that people are not paying their fair share—and that is a huge issue, but it is not the only issue—but it means that first-home buyers have no hope of owning their first home, as property attracts investment dollars that are guaranteed a tax-free return. That is a fundamental problem, and if we really want to take this country forward, that is a problem we must address.

National members have said in their contributions to this debate that Labour is wrong for promising to introduce a capital gains tax. I think possibly there are two reasons for that. One is that the increase National made to GST was not signalled ahead of the election. In fact, it specifically said it would not increase GST, so maybe members think it is a bad idea to tell people what they will do before they do it. We on this side of the House think it is better that we are upfront with people and tell people that we will introduce a capital gains tax. Let us not allow National’s approach of being not completely upfront about what it will do after an election to stand in the way of what needs to be done.

The bottom line is this country needs to have a tax plan that does not skew investment towards unproductive speculation and away from the real economy. That is why Labour’s tax package has been welcomed by those who recognise that it is time for what is essentially a level playing field to attract investment dollars. We want to attract investment to our productive sectors, to the real economy, to the economy that generates real income: the well-paid jobs, the ones that will not have to rely on Labour’s policy of increasing the minimum wage to $15 an hour. We are not ambitious for every New Zealander to be paid the minimum wage. We want people to have well-paid jobs, and highly skilled jobs. We want to have an economy that is able to produce real jobs that take New Zealand’s small economy to the big wide world, as it were, and enable those companies with those big ideas to invest in those international markets.

That is why the research and development tax credit is another critical component of our policy. It enables our companies to undertake the innovative work they need to, in order to ensure that New Zealand secures its place in the world. That is the sort of Budget we should be debating at this time, but, tragically, we are not.

AARON GILMORE (National) Link to this

It is an absolute pleasure to stand and speak after that prior speaker, because that woman previously was the Minister of Commerce in a Labour Government that oversaw the loss of $2 billion of finance companies. That woman over there, only a few months ago, publicly said in the Dominion Post—

SU’A WILLIAM SIO (Labour—Māngere) Link to this

When my colleague asked the member who has just spoken, Aaron Gilmore, what his list placing would be, he did not respond. He continued speaking, but I saw his colleagues sitting on the backbench all smiling and laughing. After listening to his speech, I now realise that we will never see that member again after the election, if we can gauge that by his colleagues who are sitting on the backbench there laughing and smiling at him He had no idea what ordinary, hard-working, middle and low income people are experiencing under this Government—no idea whatsoever. [ Interruption] The big mouth shouting from that side of the House has no idea whatsoever, either.

Hon JOHN BOSCAWEN (Leader—ACT) Link to this

This debate on the Appropriation (2011/12 Estimates) Bill and the Imprest Supply Bill has developed into a form of general debate over the Budget. I think it is very timely to look back on the last 2½ years of this John Key - led National Government. Let us acknowledge that National inherited a very difficult situation. It inherited an economy that was already in recession—it was in recession long before the rest of the world joined in—and it inherited a situation of rapidly growing increases in Government expenditure that had occurred since the 2005 election.

The tragedy of the 2005 general election is that the result looked as though it was going to be very close, so the Helen Clark - led Government went on a massive spending spree. It tried to buy the votes of ordinary New Zealanders, and we are still paying for it to this very day. I suspect we will be paying for it for many years yet. The Labour Government extended the interest-free student loan scheme. It made it so generous that any student studying at a tertiary institution would be absolutely crazy not to borrow the absolute maximum amount of money they could. Why would a parent contribute to their own child’s education if they could put that money into a bank and earn interest over the many years that their child would be studying, when under the interest-free student loan scheme that money can be paid back in debased dollars many years into the future?

The extension of the interest-free student loan scheme, just like the substantial extension to the Working for Families package was an indication of the massive increase in Government expenditure that National inherited. However, one has to query and look very critically at how National has dealt with that situation. National did not cause that situation, but it was the National Government’s responsibility to address that issue. Earlier in this debate the Minister of Finance said that the 2009 Budget focused on infrastructure. The National Government went about putting in place the building blocks for infrastructure—very important—and there was investment in roading, particularly in Auckland, in schools, and in hospitals.

The 2010 Budget was the tax switch Budget. The rate of GST went up, so the cost of consuming went up, and additional controls were put on the deductibility of depreciation so that property investment was not such a profitable business, but in return we had reductions in income tax, which rewarded people who went out and worked, and it provided an incentive to work. It also rewarded people who wanted to save. The Minister referred this afternoon to the 2010 Budget being the tax switch Budget. Finally, he went on to 2011. That was the Budget where we actually tried to get the Government books back into balance.

I believe that the last 2½ years have seen many lost opportunities. There is no doubt that the National Government inherited a very difficult situation—the world was going into recession. In fact, just this week we saw the debt crisis escalating in Europe, and we saw brinkmanship in the United States just last week. If we actually look at what the Government said back in 2010, we will see that it budgeted to spend $1.1 billion on new initiatives last year, and $1.1 billion on new initiatives this year. However, what happened was that we had an earthquake. We had a very serious earthquake, which reinforced to New Zealanders the difficult situation New Zealand was in and caused a re-examination by the National Government of its spending priorities.

The Government very proudly told us during the Budget that it had identified $5.2 billion of expenditure over 4 years that could be reprioritised, and of that $5.2 billion it allocated $4 million back into front-line services, whether that be in education, health, justice, or whatever area, with a net saving of $1.2 billion. What I am trying to say is that the Government went from anticipating spending an extra billion dollars to a net saving of $1.2 billion over 4 years. That is a turn-round of about $1.5 billion a year.

It actually took the Christchurch earthquake for this Government to have a serious examination of expenses, so when push came to shove, we saw a $1.5 billion turn-round. We know some of the areas where cuts in expenditure were made: in KiwiSaver, by trifling around the edges of student loans, and in other areas of Government expenditure. The ACT Party says that the Government has been far too lackadaisical about it. It has not identified the real issue.

We heard the Minister of Finance speak this afternoon about the need to get our debt under control, yet what do we see? We see a Budget with a $16.8 billion deficit. We know that that has been accentuated by the Christchurch earthquake. We know that of that $16.8 billion, $5.5 billion relates to Christchurch. But if we take that out, we would still see a Budget with an $11 billion deficit. If it had not been for the Christchurch earthquake, the Government would not have taken that critical look at its expenditure. The ACT Party says that has been a lost opportunity, but worse, the Government has not done a good enough job of it.

There are so many areas of wasted expenditure. One need only look at the issue of student loans. Yes, the Government has made changes around the edges; yes, it has said that people over 55 cannot borrow for their living costs; yes, it has said that people studying to become pilots cannot borrow as generously; and yes, it has said that people overseas may have to start paying interest on their loans sooner than they otherwise might. But the Government has essentially left the interest-free student loan scheme in place. A parent or student would be absolutely crazy not to borrow the maximum amount of money they possibly could. The Government is essentially telling students and their parents to borrow money for living costs and course fees, and it is telling them it will not charge any interest and they can pay it back in several years’ time.

Our country faces a crisis where we are forecasting to spend $16.8 billion more than we take in from income tax this year and just under $10 billion next year. We are facing a crisis. The Minister of Finance claims he has got the books back in order. He claims that the deficit will be back into surplus by 2015. But those claims are based on the assumption that the New Zealand economy will grow at a rate of 4 percent in 2013, and 3 percent in 2014. But if we look at the last year, we see that growth was only 1 percent. This year it is forecast to be 1.8 percent, but to make the books balance, Treasury is forecasting growth of 4 percent. Is that realistic?

I ask National members to ask themselves whether it is realistic to expect growth of 4 percent at a time of global financial meltdown. We do not know what is happening to our major trading partners in Europe and the United States. Yes, we know that a lot of our export revenues come from Asia, but we are enjoying record high commodity prices right now, and we cannot be certain that we will retain those.

The Government has also made cuts to KiwiSaver. I have said to this Parliament before that the people who gain from those cuts are the low-income earners. It is the low-income earners, who cannot afford to be in KiwiSaver, who are paying taxes so that the middle class gets those subsidies. It always fascinates me when Labour criticises tax cuts to the subsidies on KiwiSaver, because those subsidies are being paid for by the very people Labour purports to represent.

National inherited a crisis that was not of its own making, but it could have done a lot more, and still can do a lot more, and the ACT Party intends, if it possibly can, to put a lot more backbone into the National Party’s spine following November 26.

JONATHAN YOUNG (National—New Plymouth) Link to this

I am very pleased to speak on the third reading of the Appropriation (2011/12 Estimates) Bill and the second reading of the Imprest Supply (Second for 2011/12) Bill. I will start by congratulating, first, Bill English on his good, firm, steady, long-sighted stewardship of the New Zealand economy. I think that this is what this debate is about. It is about recognising the stability that the National-led Government has brought to this country. The second person whom I will congratulate tonight is Colin Cooper, the coach of Tenderlink Taranaki, who last night led our team to a great win: after trailing 26 at half-time, it came through to a 39-33 win. I raise that because Taranaki is typical of what the National Government can do: we can come from behind to win against the odds. That is what we have done with the economy. Labour left us in a losing position. We turned that round and we have brought stability during a time when we would say that the world is still experiencing the ramifications and reverberations of the debt crisis.

The Budget that we are speaking about addresses the issue of reducing debt. It is very important to see that this Government is led by sound and sensible people, who have presented what I believe the New Zealand public are acknowledging as sound and sensible policies. Because of global uncertainty, New Zealand needs more than ever to have these sound and sensible policies, led by solid leaders. New Zealand is not immune to what is happening around the world. We trade with the rest of the world, and if the world slows down, then yes, it will have an impact on us. So being able to foresee those movements and make adjustments, and being able to continue to trade with countries overseas such as Australia, which is our largest market, and China, which is now our second-largest market, are very important for the future prosperity and security of this country, and for the jobs that we are seeing come into the market place more and more.

We still have flexibility in our economy, which a lot of other countries do not have. In theory, there is room for the Reserve Bank to cut interest rates if necessary. Our exchange rate is still relatively high, so again there is the opportunity for that to ease back if we see global commodity prices coming back. We have some headroom, and all of that is because of the result of our efforts over the last 3 years to see New Zealand placed in a far better position than many other countries to manage what will remain an uncertain global environment for a number of years ahead.

The comments that I have made are not what people might think—just biased comments from a member of the National-led Government and the National Party—because media reports and companies like, for example, Fairfax, which pride themselves on being unbiased, say that New Zealanders are recognising the solid leadership that this Government has brought in such difficult global times. Eighty-five percent of voters view the state of the economy as being either important or very important in deciding their vote. We understand that; we know that. Furthermore, Fairfax Media - Research International polls show that 49 percent of voters think that National has the best plan to fix the economy. That is well ahead of Labour, which is on 17 percent. Fewer than two voters out of 10 have any confidence in Labour’s plans. What is really astounding is that only 48 percent of Labour’s supporters back its plan to fix the economy.

STUART NASH (Labour) Link to this

This election, the people of New Zealand have a very clear choice. They can choose between a Government that wants to sell State assets and a Labour Party that has delivered a clear, bold economic plan that will allow every single New Zealander to retain ownership of the assets they currently own, and we will plug a hole in our tax system that at the current time is inherently unfair. There is a choice between a party that will give a hard-working New Zealand family $1,000 extra a year—every single New Zealand family $1,000 extra a year—and a Government that gave someone who earned $1 million a year $1,000 a week. The top 700 people, who earn over $1 million a year, got $1,000 a week in the hand when the good, hard-working, struggling people of Napier received about $11 dollars a week. The price of petrol ate away that, let alone everything else.

I would just like to run over some of the comments a couple of the previous speakers made. I tell Jonathan Young there is an expression, and it goes “lies, damn lies, and statistics”. One can use statistics for anything one wants, but we know there is only one poll that matters. To quote a former Prime Minister of New Zealand Jim Bolger, there is only one poll that matters and it is the poll on 26 November. Jonathan Young told us what he thought. Well, I do not believe that many people in New Zealand really care what Jonathan Young thinks. I do not think he has anything. But Jonathan Young did say that his Government took off the sharp edges of the recession for hard-working New Zealand families. Well, I do not know about that, because when the Government gave $11 a week back to the hard-working people of Napier, the price of petrol went up by $15 a week. Yet those who earned $1 million a year got $1,000 a week. That is not particularly fair as far as I am concerned.

Aaron Gilmore stood up and said that the Government should not be in the business of owning businesses, because of the risk. Well, that is a tired old argument—it is a tired old argument. What I say to Mr Gilmore is: what about the risk of not owning our key infrastructure? What about the risk of foreigners owning our key infrastructure? There are many examples of foreigners who have come in, bought our assets, stripped them, and raised up the price. Do members know who suffered? It was the good, hard-working people of New Zealand.

The last major piece of infrastructure that was sold was Contact Energy, by Mr Bill English. Now what we have is $100 million—